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Week In Review


Presidents Trump and Xi came to an agreement to refrain from implementing additional tariffs for 90 days while the U.S. and China negotiate on forced technology transfer, intellectual property theft, state support for strategic industries, and the bilateral trade balance between the U.S. and China.  Trump then stated that Chinese tariffs on auto imports from the U.S. would be reduced, but there was no confirmation from the Chinese or further details on this.  At the request of the U.S., Canada arrested the CFO of Huawei, an important firm in China’s strategic efforts to build a capability in telecommunications equipment.  Markets rallied on the initial news of an agreement, but then slumped as the lack of detail became clear.  Markets slumped further following the arrest of the Huawei executive.

Our Take

The delay in implementation of additional tariffs and the opening of dialog are positive developments, and this is supportive of continued global economic growth.  However, while the Chinese may be willing to make larger purchases from the U.S., they are unlikely to offer much on technology transfers and state support for building strategic capabilities.  The capital markets are right to be skeptical of any breakthroughs until both sides implement tangible actions.


November nonfarm payrolls rose by 155,000 jobs, below consensus expectations.  The unemployment rate remained at 3.7%, while average hourly earnings rose 0.2% in November and 3.1% year-over-year.

Our Take

The unemployment report was weaker than expected, both in jobs created and wages paid.  Despite this month’s weakness, employment remains on solid footing and is unlikely to prevent the Fed from raising rates this month.  In fact, the employment picture is likely to be cited as a reason to continue tightening.  Should the Fed choose to pause in December, the current benign inflation environment is much more likely to be the reason.


Oil prices rallied from recent lows, as OPEC and Russia agreed to implement production cuts of 1.2 million bpd and the Alberta provincial government ordered producers to reduce production due to transportation and storage constraints.

Our Take

If fully implemented, these production cuts are likely to reduce inventory builds and prevent a further significant leg down in oil prices.  However, Russia is unlikely to be willing to cut as much production or to maintain cuts for as long as in 2016.  Also, with pipeline constraints in the Permian Basin easing U.S. shale production, there is likely a lid on how much higher these production cuts can move crude prices.


Detroit sold $135 million of junk-rated general obligation debt on Tuesday.  The new issue was the first since the city filed for bankruptcy in 2013.  The issue, which was slated to be $111 million, was increased to $135 million due to strong demand.

Our Take

Even though Detroit has taken steps to improve its fiscal health and is operating with a balanced budget, there was uncertainty surrounding how investors would treat Detroit’s reentry into the municipal market.  Many believe that the success of this week’s Detroit bond sale can be attributed to low supply and investors’ appetite for yield.

All expressions of opinions are subject to change without notice in reaction to shifting market conditions.  All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness.  Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities, and should not be relied on as financial advice.